Subscription Billing and the Era of Customer Experience [Video]

7 min read - by Elan Sherbill on Jun 16, 2016

The key to building recurring revenue streams is building long-term customer relationships. And that means focusing on delivering great customer experiences and not just when customers come to pay. Your ability to grow customer lifetime values within a subscription billing model depends on how well you deliver continuous and consistent value to your customers over the course of many years and many subscription events.

Transcription

You’re actually in the area of customer experience. What I mean is that your product is not a one-time transaction or a one-time sale. Where it’s going, if it isn’t there already, is a subscription-based product — a product that you deliver through the cloud where the customer interacts on a daily or even weekly basis.

For that, you need to start caring more about how that customer experience is on an ongoing basis, rather than whether they’re happy when they buy the product that one time, that once a year, like it is in a transaction world.

The question I would ask to you is, “Do you care about conversion rates, which is the revenue that you would make from a customer initially, or do you care about the lifetime value of a customer?” What we really want to think about for a subscription-based company is, “What is the lifetime value?”

If you’re focused on giving great service and giving a great experience to the customer, you’re likely to have much more success than if you’re focused on just making some money that one time and not worried about you’re going to be one year later or two years later.

Analysis

This video contains two messages for subscription businesses. The first says focus on customer experience. The second says that when you focus on customer experience you have to change how you measure success.

Customer Experience

Essentially, Craig is saying that subscription businesses need to fundamentally change the way they look at the value they are providing customers. When you demand that customers pay $10, $50 or $100 every month or every year to continue using your service, you better make sure that every time they have to interact with your business that it’s a positive experience. The key to the era of customer experience is knowing that positive UX isn’t only found in the product or service. It’s everywhere users touch your brand. And that happens a lot more than you’d think. Especially with subscriptions.

There are thousands of opportunities for customers to interact with your brand. You have sign-up pages and trial registrations, and the payments, and the entire My Account section. And then comes license management and renewals and upgrades and downgrades and even (gasp!) cancellations. Even when they cancel you have to provide world-class service. Your reputation is on the line. So it’s imperative that you offer customers not only a great product, but a great customer experience in all respects. And that means caring about the details and making sure that every click from trial to renewal results in a smile. If that’s too much, at least keep your customers from facepalm.

Conversion Rate vs. Customer Lifetime Value

Embracing the era of customer experiences means changing the way you think about and report success. In the old world of perpetual licenses, companies measured their ecommerce success by conversion rates. Were visitors coming to the shopping cart and completing the order? That’s a win! Oh they’re not using the product? Who cares? We got the sale. It was all about the Buy Button.

With subscriptions, the sale is the start of the relationship. Not the end. In today’s world of cloud computing businesses are lucky enough to know how much and how often their products are used. They know what the most popular features are and they know what the least popular features are. They analyze customer complaints to discover recurring problems and correct the issue immediately. They’re not waiting to release new important features for version 2.0 two years down the road when they can hopefully cash in on upgrade fees.

This is what Craig means later in the video, when he explains that this whole new approach to business value, the era of customer experience, goes hand in hand with a shift in how to look at your data and which metrics to focus on. When you focus on one-time transactions and look to raise conversion rates without factoring in how those conversion rates affect CLV, you’re setting yourself up for failure. Maybe that’s too strong.

But if all you are concerned about is getting as many people into the store as possible, and then testing to figure out the best way to get those visitors to pay you for your product, if you’re only focus is that initial transaction, you are missing the big picture. There’s been a powerful but subtle change brought on by the wave of cloud computing and subscription billing. When you demand recurring revenue you are expected to deliver recurring value. And the ones who succeed are those that pay attention to every last detail. The ones who see this change understand just how important it is for them to make sure that their loyal subscribers, their dedicated paying customers, experience such exquisite attention to detail that they don’t even know it.

More resources

If you’re interested in learning more about some of the topics mentioned in today’s video from Craig, check out Andrea Bailiff Gush’s post from last week New Model, New Metrics – Subscription Metrics Defined. Andrea explains some of the concepts behind these important subscription metrics that Craig mentioned.